When stocks go up or down, what exactly do people mean by “the Dow?”

When someone casually uses a term they assume you understand but don’t, you have a few choices. You can get frustrated, or you can look it up. Financial jargon can be a code of confusing abbreviations and arithmetic. Let’s focus on one of the most common bits of shorthand: “the Dow.”

There are many stock market indices, which are a set of stocks designed to convey various trends in the market overall. The Dow comprises 30 stocks from the New York Stock Exchange and uses price-weighting to determine the amount of influence each stock has at any given time. The higher the share price, the more influence the stock exerts.

Of the four words in “Dow Jones Industrial Average,” only two of them are truly accurate. The latest set of 30 stocks has little connection to manufacturing or “industry,” and, because of the price-weighting formula, there is no average involved. Maybe it is just as accurate to call it “the Dow.” Just be careful not to confuse it with the Tao, or Taoists might be annoyed.

The link to Edward D. Jones is the wrong person. The Edward D. Jones of Edward Jones Investments fame would have been three years old at the time Charles Dow created his index. The correct person is Edward Davis Jones the statistician (http://en.wikipedia.org/wiki/Edward_Jones_(statistician)).

[...] THE DOW DAY CA-CHING to some smiles bring — based on “hocus-pocus” — Though the language is Greek URDU Rupert FOX Wall Street — the Journal has conservative focus. — Is there manipulation in stimulation with someone’s big fat finger — Buy Sell that’s swell but the BEAST won’t tell — it’s “ACHIEVEMENT” of “BLAME” is the stinger. –>>Rupert L.T.Rhyme [...]